A third of new leases on high street shops have break clauses compared to just 3.9 per cent in 1999, new data has revealed.
Retailers are looking to hedge against economic uncertainty by allowing themselves an exit option for rental agreements and the average lease length is now just 5.7 years.
The research was conducted by the Investment Property Databank on behalf of the British Property Federation (BPF) which is presenting its findings to the head of the government’s review into the decline of the high street, Mary Portas.
With more than 47,500 rental tenancies included in the study the research was the largest of its kind, and BPF CEO Liz Pearce hopes the data will enlighten Portas about the evolution of leases on the UK high street.
Peace said: “The issues facing our high streets are extremely complex with recession, structural changes caused by the internet and consumer preference all in play. In such times of change it is important that leases adapt.
“Today’s data clearly shows landlords are increasingly flexible and retail property leases continue to adjust to economic conditions, with leases that are shorter, offering breaks and substantial rent-free periods to help new shops to get off the ground.”
TV personality and businesswoman Portas has been instructed to investigate the problems that have plagued town centre retailers in recent years and suggest ways to revive secondary and tertiary centres which struggle to support local businesses.
Although high rental values are often cited as a major obstacle for independent retailers, separate BPF research found that whilst inflation has risen by 94 per cent since 1989, rents for standard shops have risen just 24 per cent meaning a fall of 37 per cent in real terms.
However rate increases, which are linked to RPI rather than the lower CPI used in the government’s official inflation data, have resulted in retailers’ bills being 94 per cent higher than in 1989.
Regional fluctuations in demand have meant rental growth for standard shops since the end of the eighties has been 51 per cent in central London, around half of that for the rest of London and as little as ten per cent for the south-east and eastern regions.
“During the last early-90s recession, there were legitimate claims from the retail community that the ‘institutional lease’, which commonly was for 20 years plus, with upward only rent reviews and no breaks, was inconsistent with many retailers’ needs,” Peace added.
“The property industry has significantly changed the variety of its offer and I don’t think that is always well recognised.
“Rather like our high streets, however, the property industry thrives on its variety, and ability to raise investment. There is no one-size lease, but a mix that caters for our industry’s office, industrial and retail customers.”